I’ve been taking a look around the various sectors of the FTSE 100, and I’m going to finish today with a look at five companies pulled from three sectors but which all fit under a general “technology” umbrella.
ARM Holdings (LSE: ARM) (NASDAQ: ARMH.US) is the big one, with the chip designer’s shares having soared by more than 900% over the past decade to 917p.
Next is CSR (LSE: CSR), another semiconductor company also based in Cambridge with ARM. CSR’s Products are mainly aimed at communications — Bluetooth, GPS, Wi-Fi, etc. CSR’s shares are up 220% over three years to 759p.
Inmarsat (LSE: ISAT) does satellite-based communications. But its not your usual mobile phone company — it provides services to governments, businesses, maritime users and others via its network of 11 geostationary satellites. Inmarsat shares have been volatile, but they’re up 150% over five years to 720p.
Then comes Pace (LSE: PIC), the digital TV specialist that ships millions of set-top boxes every year. And finally Sage Group (LSE: SGE), the producer of accounting and enterprise planning software. Pace shares have six-bagged over 10 years to 302p, with Sage up 125% over the same period.
| Â | ARM | CSR | Inmarsat | Pace | Sage |
|---|---|---|---|---|---|
| Market cap | £13.2bn | £1.27bn | £3.19bn | £0.96bn | £4.14bn |
| EPS change 2013 | +40% | +64% | -7% | +26% | +12% |
| P/E | 52.6 | 22.5 | 21.5 | 11.6 | 14.8 |
| Dividend Yield | 0.5% | 1.3% | 3.8% | 1.1% | 3.4% |
| Dividend Cover | 3.66x | 3.38x | 1.22x | 8.07x | 2.00x |
| EPS change 2014* | +11% | +4% | -23% | +13% | 0% |
| P/E | 40.5 | 26.7 | 26.5 | 9.9 | 17.1 |
| Dividend Yield | 0.7% | 1.2% | 4.1% | 1.1% | 3.1% |
| Dividend Cover | 3.47x | 3.09x | 0.92x | 9.16x | 1.89x |
| EPS change 2015* | +23% | +19% | -7% | +8% | +9% |
| P/E | 33.0 | 22.4 | 28.4 | 9.1 | 15.7 |
| Dividend Yield | 0.9% | 1.3% | 4.2% | 1.3% | 3.3% |
| Dividend Cover | 3.47x | 3.34x | 0.82x | 8.59x | 1.92x |
* forecast
A unique proposition
Inmarsat has had a couple of tough years with cuts in government expenditure, so dividends will be squeezed if earnings don’t get growing again — and that’s been hampered by delays in its latest satellite launch. For me it’s a company that seems to have great potential, but which I really don’t know how to value right now, so it’s not my choice.
Sage produces essential business software and is doing well at it, with relatively modest P/E valuations and a dividend that’s a little above average and is adequately covered. But for technology growth, it doesn’t grab me like the others.
I think Pace is looking undervalued, and there’s surely plenty of growth left in the market for all those magic boxes that come with digital television services. There’s little in the way of dividends at this growth stage, but there’s plenty of cover by earnings to hike them when the firm gets closer to maturity.
Chip design
I’ve already spoken of my liking for ARM Holdings, and I think I’d extend that to CSR too. I think it’s a bit of a dark horse with some definite potential, and I like it enough that I’d dig deeper if I was considering buying.
But I do think we’re at one of those rare moments right now when ARM shares are relatively undervalued — and as I know the company better than any if the others here, ARM would be my choice.